Market participants and analysts have hailed the Reserve Bank's measures announced to deepen the corporate bonds market, saying the move will go a long way in developing the nascent debt space.
Welcoming the RBI measures, Karthik Srinivasan, Senior Vice-President, Icra, said, "The slew of measures announced by RBI should encourage greater participation from issuers, investors and intermediaries as it has accepted many of the recommendations of the Khan committee report." Specifically welcoming the move to allow banks to raise masala bonds, he said this can develop the overseas market for rupee-denominated bonds.
He also said the access to the repo window for the debt brokers, coupled with the access to trade directly on G-secs and corporate bonds for foreign portfolio investors, should improve liquidity in domestic markets.
Earlier today, outgoing Governor Raghuram Rajan relaxed the guidelines for corporate bond market and allowed banks to issue masala bonds.
To improve fixed income and currency markets, RBI allowed lenders to issue 'masala bonds' and will accept corporate bonds under the liquidity adjustment facility (LAF).
Credit Suisse India's Gaurav Pradhan termed it as an extremely proactive step from RBI which acknowledges the potential of the masala bond market.
"Issuance by banks will help broaden and deepen the market for masala bonds, making the product more sustainable in the long run as a financing option. From a macro perspective, we expect RBI's move to help banks better manage their balancesheets and lower their cost of funds, and should have a positive impact on local interest rates," said Pradhan.
Consultancy PwC India's partner Munesh Khanna said the move is in response to long-pending demand from the market.
"To meet the long-standing demand of deepening the corporate bond market, these steps... are extremely welcome.
In addition, the ability of banks to issue rupee bonds for tier 1 and 2 capital and for financing infra projects augurs well for the economy," Khanna said.
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